Issues
With the broad market making new highs in the face of renewed tariff threats, it seems investors are willing to shrug off macro concerns, at least for now.
We’ll heed the bullish action by stepping into three new positions this month, but hedge our bets by making one of them a half-sized position. We also add two new names to our Watch List.
We’ll heed the bullish action by stepping into three new positions this month, but hedge our bets by making one of them a half-sized position. We also add two new names to our Watch List.
One common market saying is that rotation is the lifeblood of a bull market, but that’s only partly true: If the rotation sees leaders pull in normally while buying pressures broaden out, that is a good thing, giving the market a stronger foundation for future gains. But if the leaders crack intermediate-term support while money chases beaten-down titles, that can lead to trouble as the market (and those laggards) often end up following the leaders lower. Happily, so far, the rotation that began in late June and has carried on since has been more in the former camp. While we’ve pulled in our horns a bit, we remain overall bullish. We’ll move our Market Monitor to a level 7 and see how things go from here.
This week’s list definitely has a value and turnaround flavor, following along with some of the rotation seen in recent weeks. Our Top Pick reacted well to earnings last week (heaviest daily volume since 2020!) after management reinstated bullish guidance. Start small and add on the way up.
This week’s list definitely has a value and turnaround flavor, following along with some of the rotation seen in recent weeks. Our Top Pick reacted well to earnings last week (heaviest daily volume since 2020!) after management reinstated bullish guidance. Start small and add on the way up.
Not much has changed with the market in the two weeks since our last issue. Stocks have largely stagnated, which is no surprise given the calendar and the 20% off-the-bottom rally from April that preceded it. Now comes the hard part: Can stocks continue to climb higher now that they’re hitting new highs and essentially priced for perfection? That could be difficult, especially with tariffs back in the news (in a bad way) and Q2 earnings season underway. So, to prepare for another potential pullback, today we add a value stock that comes from an industry that was left for dead a few short years ago but is now having a moment: movie theaters. It’s a stock I recommended in my Cabot Value Investor advisory last week.
Details inside.
Details inside.
The market’s big-picture outlook remains excellent, and we’re keeping most of our focus on that. However, there’s no doubt that we’re starting to see some growth stock wobbles, as today was the 3rd day of distribution in the group while money rotates into the broader market. That’s no reason to be defensive, but we are selling one name tonight that flashed abnormal action and holding a bit more than 30% cash on the sideline for now. Our goal is to ditch any laggards or names that crack and eventually replace them with big leaders, some of which are in a rest phase that should result in higher-odds entries.
Glad to be back! A lot has happened in the two weeks since I last wrote, with the market reaching new record highs despite the tariff deadline coming and going without a ton of clarity. And now second-quarter earnings season has arrived, which could provide further wind in the market’s sails, though estimates are more tempered (5% growth, vs. 14% growth among large-cap companies in Q1) this time around.
Meanwhile, our portfolio is humming, with TWO of our stocks reaching their price targets today! We’ll “retire” them to make room for today’s new recommendation, from an industry I wrote extensively about in our last update: movie theaters. The hope is that this movie theater stock will follow in the footsteps of United Airlines (UAL) and Carnival Corp. (CCL) and quickly reach our price target as shares play catch-up to their fundamentals due to some post-Covid lag.
Details inside. Enjoy!
Meanwhile, our portfolio is humming, with TWO of our stocks reaching their price targets today! We’ll “retire” them to make room for today’s new recommendation, from an industry I wrote extensively about in our last update: movie theaters. The hope is that this movie theater stock will follow in the footsteps of United Airlines (UAL) and Carnival Corp. (CCL) and quickly reach our price target as shares play catch-up to their fundamentals due to some post-Covid lag.
Details inside. Enjoy!
We don’t yet know what the inflation rate for June will be (report is due July 15), but in the latest Federal Reserve meeting—reading between the lines—it seems economists expect the Fed to lower rates a couple of times during the remainder of the year.
And, just in the last few days, it’s been reported that Goldman Sachs now expects the Fed to cut rates three times.
We’ll see.
And, just in the last few days, it’s been reported that Goldman Sachs now expects the Fed to cut rates three times.
We’ll see.
Tariffs are back.
Of course, stocks could continue to move higher. The optimists have been right so far. But the indexes are near all-time highs, while uncertainty abounds. It might not be the best strategy to pay a premium for a stock in a precarious market.
Fortunately, while the overall market is near the high, there are stocks that are still cheap. The amazing market recovery from the April low has been led by technology, which accounts for about one-third of the S&P index. That sector has soared over 40% in the last three months. But many great stocks are still priced far from their 52-week highs.
In this issue, I highlight a financial industry powerhouse with a long track record of outperforming the market. The stock is well below the 52-week high and selling near its cheapest valuations in years. While the market could go either way in the weeks ahead, this stock is well-positioned to boom when the environment normalizes. Meanwhile the current uncertainty is keeping it cheap.
It may seem like stock prices have run away in the impressive recovery from the April low. But there is a stock where it’s still April.
Of course, stocks could continue to move higher. The optimists have been right so far. But the indexes are near all-time highs, while uncertainty abounds. It might not be the best strategy to pay a premium for a stock in a precarious market.
Fortunately, while the overall market is near the high, there are stocks that are still cheap. The amazing market recovery from the April low has been led by technology, which accounts for about one-third of the S&P index. That sector has soared over 40% in the last three months. But many great stocks are still priced far from their 52-week highs.
In this issue, I highlight a financial industry powerhouse with a long track record of outperforming the market. The stock is well below the 52-week high and selling near its cheapest valuations in years. While the market could go either way in the weeks ahead, this stock is well-positioned to boom when the environment normalizes. Meanwhile the current uncertainty is keeping it cheap.
It may seem like stock prices have run away in the impressive recovery from the April low. But there is a stock where it’s still April.
The recent bull run continued last week, this time led by Small Caps (IWM), which gained 3.5%, followed by a gain of 2.3% for the Dow, and 1.7% for both the S&P 500 and Nasdaq.
Nothing’s changed with the market from a top-down point of view: It’s bullish, with the intermediate-term trend pointed up, and now we’re seeing new highs expanding as more stocks join the parade. Individual stocks remain trickier, as we saw some rotation out of growth and into some other areas last week—if leaders decisively crack, that could be bearish, but to this point, the action has mostly served to broaden the advance, which is a good thing. We wouldn’t go wild on the buy side right here, but we continue to advise following the positive evidence—we’ll leave our Market Monitor at a level 8.
This week’s list is definitely broader than it has been in recent weeks. Our Top Pick is helping to lead what looks like a fresh group move.
This week’s list is definitely broader than it has been in recent weeks. Our Top Pick is helping to lead what looks like a fresh group move.
The recent bull run continued last week, this time led by Small Caps (IWM) which gained 3.5%, followed by a gain of 2.3% for the Dow, and 1.7% for both the S&P 500 and Nasdaq.
The recent bull run continued last week, this time led by Small Caps (IWM) which gained 3.5%, followed by a gain of 2.3% for the Dow, and 1.7% for both the S&P 500 and Nasdaq.
The S&P 500 and Nasdaq reached new records on Wednesday, reversing Tuesday’s declines. President Trump’s tax-and-spending bill squeaked through the Senate and is now at the heart of a battle in the House. This is hopefully settled today, and a setback would have an impact on the stock market.
Luckin Coffee’s (LKNCY) revenue in China has already surpassed Starbucks in China. This week, it brought the battle to America as its first two U.S. locations opened in New York. This may be just a public relations gambit.
Luckin Coffee’s (LKNCY) revenue in China has already surpassed Starbucks in China. This week, it brought the battle to America as its first two U.S. locations opened in New York. This may be just a public relations gambit.
Updates
The U.S. stock market is doing just fine. More than fine, in fact. On Tuesday, the S&P 500 closed at a new all-time high, and the index is up roughly 4% year to date through the first seven weeks of 2025. That comes on the heels of back-to-back years of gains in excess of 20%. And while the current bull market has been mostly spearheaded by a handful of artificial intelligence and Magnificent Seven stocks, the rally is finally starting to spread, with the Equal Weight index also up 4% this year, the Dow Jones Industrial up nearly 5%, and the Russell 2000 up nearly 3%.
While the S&P 500 has stalled at about the same level since late November, it’s been more exciting under the hood.
The market indexes have stalled mostly because of technology. Those stocks still haven’t fully recovered from the DeepSeek plunge in late January. At the same time, earnings for the rest of the market are catching up.
The market indexes have stalled mostly because of technology. Those stocks still haven’t fully recovered from the DeepSeek plunge in late January. At the same time, earnings for the rest of the market are catching up.
The market has been sideways for the past couple of months. It’s up YTD because of a rebound from the December swoon. But the S&P is still at about the same level it was in early December.
Earnings have been solid, averaging about 11% growth in the quarter as tech earnings moderate and the rest of the market catches up. Earnings are expected to average about 14% in 2025. But the solid earnings quarter is only helping the market hold serve in the face of higher interest rate expectations, tariffs, and a strong dollar.
Earnings have been solid, averaging about 11% growth in the quarter as tech earnings moderate and the rest of the market catches up. Earnings are expected to average about 14% in 2025. But the solid earnings quarter is only helping the market hold serve in the face of higher interest rate expectations, tariffs, and a strong dollar.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), American Airlines (AAL), Berkshire Hathaway (BRKB), Sirius XM (SIRI) and SLB Ltd. (SLB).
Overall market liquidity remains ample, yet small-cap stocks have lagged in recent months, suggesting money availability isn’t as profuse as it was last year.
Overall market liquidity remains ample, yet small-cap stocks have lagged in recent months, suggesting money availability isn’t as profuse as it was last year.
WHAT TO DO NOW: We continue to stay relatively close to shore as the major indexes remain rangebound and many stocks are hit and miss—but we are impressed given the resilience shown after some worrisome headlines, and earnings season has gone fairly well so far. Today and tonight, we’re making a few small moves: On the sell side, we sold one-third of our AppLovin (APP) stake today and, tonight, will sell half of our On Holding (ONON) position—but we’ll also buy an additional 3% position to Duolingo (DUOL) and start a half-sized stake in DoorDash (DASH). All told, we’ll still have a mid-40% cash position, but we could do more buying if the recent resilience leads to clear buying.
Small caps have underperformed since last Thursday with yesterday’s selloff pushing the index to the lowest level since mid-January.
The main culprits are yesterday’s slightly hotter-than-expected CPI report, concerns about tariffs (carveouts expected) and an uptick in bond yields. Yesterday the 10-year yield jumped back to 4.64%, a three-week high.
The main culprits are yesterday’s slightly hotter-than-expected CPI report, concerns about tariffs (carveouts expected) and an uptick in bond yields. Yesterday the 10-year yield jumped back to 4.64%, a three-week high.
On last Friday’s Cabot Street Check episode, the weekly podcast I co-host with my colleague Brad Simmerman, we welcomed on four different Cabot analysts to help us take the market’s temperature in the midst of an eventful and rather volatile start to 2025. All four of them – Mike Cintolo, Cabot’s Chief Investment Strategist; Jacob Mintz, our options trading expert; Tyler Laundon, our small-cap and early-stage stock expert; and Clif Droke, my fellow value investor who runs the Cabot Turnaround Letter – described themselves as varying degrees of “cautiously bullish.” Given all the headlines of late, that qualifies as a victory.
These are dark days for cannabis investors, maybe the darkest ever.
AdvisorShares Pure U.S. Cannabis (MSOS), one of the key benchmark exchange-traded funds in the space, is down 85% in the past five years against market gains of 80%.
As has always been the case, the fate of cannabis stocks is much more about politicians than the leadership and results at cannabis companies.
AdvisorShares Pure U.S. Cannabis (MSOS), one of the key benchmark exchange-traded funds in the space, is down 85% in the past five years against market gains of 80%.
As has always been the case, the fate of cannabis stocks is much more about politicians than the leadership and results at cannabis companies.
Stocks continue to move higher despite more tariff news. A 25% tariff was announced over the weekend on all imported steel. But the market is so far taking the news in stride during a good earnings season.
We’ll see what happens with the tariffs. But whatever happens with this latest round, it is most likely that tariff issues will remain at least a background story for most of this year. Meanwhile, stocks are being buoyed by strong earnings.
We’ll see what happens with the tariffs. But whatever happens with this latest round, it is most likely that tariff issues will remain at least a background story for most of this year. Meanwhile, stocks are being buoyed by strong earnings.
In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Alcoa (AA), Janus Henderson Group (JHG), Paramount Global (PARA), Starbucks (SBUX) and Teladoc Health (TDOC).
The market is continuing its bumpy ride higher. Despite a barrage of concerns, 10 of the 11 S&P 500 stocks sectors are higher year to date.
While Nvidia (NVDA) has pulled back more than 20% over the past two weeks, our conservative AI play IBM (IBM) has tacked on 40 points over the same period- hitting an all-time high early this week.
Cloudflare (NET) shares were up again this week and are now up 28% in 2025 to reach 140.
Dutch Bros (BROS) shares rose 8.5% this week and have surged 23% so far in 2025.
Cloudflare (NET) shares were up again this week and are now up 28% in 2025 to reach 140.
Dutch Bros (BROS) shares rose 8.5% this week and have surged 23% so far in 2025.
Alerts
Enovix (ENVX), Weave (WEAV), TransMedics (TMDX) and Zeta (ZETA) Deliver
WHAT TO DO NOW: The major indexes are bouncing some this morning, but growth stocks remain mixed, and after last week, many are damaged. We’re going to sell the rest of our small CrowdStrike (CRWD) position, as not only is the stock fading again, but we think perception has likely been crushed and could stay that way. That will leave us with 54% in cash—that’s too high given the top-down evidence, so while we’ll hold onto it for the moment, we could put some back to work this week if things shape up a bit.
Today, a whopping eight Profit Booster positions will expire. Most are “slam-dunk,” full-profit trades, while others will go down to the wire.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
The big takeaway, before we dive in, is we are going to let the situation play itself out, and come Monday/Tuesday of next week we will revisit our profits, as well as how we will manage the remaining positions.
WHAT TO DO NOW: It’s been a brutal week for growth stocks in general, with the major indexes off some but with more breakdowns than we have seen in a few months. Today’s update involves CrowdStrike (CRWD), which is getting hammered today after an update glitch has disrupted a ton of the world’s operations overnight and this morning. To respect the action, we’re going to sell one-third of what we have, though we’ll hold the remaining small-ish position for now. Many more details below. Our cash position will be just shy of 50%, which we’ll hold onto as we wait for growth stocks to find support.
Portfolios
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Earnings Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
An updated portfolio for Cabot Options Institute – Fundamentals Portfolio.
An updated portfolio for Cabot Options Institute – Income Trader.
An updated portfolio for Cabot Options Institute – Quant Trader.
Strategy
A few Cabot Options Trader subscribers have asked me about ways to protect gains in their portfolios, so I thought I would write to everyone with a couple of strategies using options to hedge your portfolio.
A subscriber recently asked me if I keep a journal of my trades. Many traders keep journals so they can look back at their trades and evaluate what they did right and what they did wrong.
Want to know how the big institutional investors use options? Here is an example of how one trader spent $132 million on three technology stocks.
Options trading has its own vernacular. To know how to do it, you need to know what every options term means. Here are some of the basics.
Our Cabot Top Ten Trader’s market timing system consists of two parts—one based on the action of three select, growth-oriented market indexes, and the other based on the action of the fast-moving stocks Cabot Top Ten features.